A bar graph made up of houses representing increasing mortgage rates.
Illustration by Lanette Behiry/Real Estate News

Mortgage rates surge to new heights 

For the fifth straight week, 30-year mortgage rates went up, hitting 7.23% — the highest level since 2001.

August 24, 2023
2 minutes

Key points:

  • Daily rates declined for the first time in two weeks, a possible sign that mortgage rates have peaked for now.
  • Elevated rates are pushing down home sales, but inventory remains low, so prices aren’t likely to tumble.
  • Mortgage activity has also fallen, with purchase applications dropping to levels last seen in April 1995.

Mortgage interest rates continue to frustrate buyers and sellers, surging to their highest level in 22 years.

Driven by strong economic indicators and elevated bond yields, the 30-year fixed rate averaged 7.23% this week, according to Freddie Mac's latest survey. That's up from last week's 7.09%. The 15-year fixed-rate also jumped to 6.55%, up from 6.46% a week ago. 

As mortgage rates climb for the fifth consecutive week, home sales will continue to slow, possibly falling to levels last seen around the Great Recession, said Lisa Sturtevant, chief economist at Bright MLS.

"Unlike 2010 and 2011, however, when inventory flooded the market, sending prices down, the higher-rate environment we are in now is also keeping supply low," Sturtevant said. She predicts home prices will fall "only modestly or stay stable in most markets." 

But there are signs that this run of increasing mortgage rates might be nearing an end. Mortgage News Daily reported a drop in its daily survey for the first time in two weeks, with the 30-year fixed rate at 7.36% on Aug. 23.

As the Federal Reserve surveys the economic landscape during its meeting next month, it may have a tough decision to make. Danielle Hale, chief economist at Realtor.com, expects the Fed to forgo another rate hike in September.

"The more open question is whether additional hikes are in store as we near the end of the year," Hale said.

Buyers who are determined to purchase a home are navigating the market in various ways, said George Ratiu, chief economist at Keeping Current Matters. That includes taking advantage of high home equity and relying on family for cash assistance.

Ratiu noted that the monthly cost to purchase a home, not including property taxes and insurance, is up 17% compared to a year ago.

Elevated interest rates continue to stifle mortgage activity. Applications were down 4.2% from the week before, according to the Mortgage Bankers Association. Purchase applications are down 30% compared to a year ago, falling to "their lowest level since April 1995, as homebuyers withdrew from the market due to the elevated rate environment and the erosion of purchasing power," said Joel Kan, MBA's deputy chief economist.

Get the latest real estate news delivered to your inbox.